The fatigue factor

Total gross profits:  $-75.00  -1.50 ES points
Total trades:  17 [4 scratch]
Accuracy:  46.2%
Execution score: tbd%
Opportunity cost: $tbd 

Today was yet another day where I had a "no-duhhh" moment.  Although I've been daytrading nearly a year now, it's only today that I realized I can't trade without having a meaningful break during the trading day. 

But maybe it's because I got a bit less sleep than usual for the 2nd night in a row, I really felt the effect of fatigue today.  I was trading nearly non-stop from 8:30 AM until 4:15 PM, with maybe a few minute break several times throughout the day. 

I was doing fine in the morning and felt pretty good about trading with the new setups in my trading plan.  My performance in the morning to the early afternoon wasn't bad, and there were some more errors than usual with some of the scalp setups I tried out.  But as the afternoon progressed, I realized that my ability to make decisions and to interpret the charts for signals began to diminish.

My vision turned into tunnel vision, the wheels started to wobble, and I caught myself moving my trailing stops in much sooner and tighter than usual.  I started to tune out the rest of the world.  And before you know it, a +5.00 ES points day that was pretty much locked up in the final hour turned into a -1.50 loss in practically minutes. 

My tired mind said to go for a strong finish into the close with profits after having a few frustrating breakeven trades, I listened, and I doubled up.  However, instead of having a strong finish, it turned into a wipeout of my profits for the day.  The ultimate ANTI-comeback day.  Casino style gambling at its finest.

At least I realized what took place today and how most of my revenge trading has taken place late in the afternoon, most notably in the 3:00 PM hour.  I now realize that fatigue is one key trigger to rogue and revenge trading.  Now that I'm aware of this, I will take steps to control this situation.

How many warning flags does it take?

Total gross profits:  $-825.00  -16.50 ES points
Total trades:  10 [1 scratch]
Accuracy:  11.1%
Execution score: 27.2%
Opportunity cost: $+625.00  +12.50 ES points
   <-  It should have been
         about a -4.00 day

Late last week on short notice, my mother's burial was scheduled for today due to some botched up planning by the cemetery.  Unfortunately, I couldn't fly across the country at the last minute due to my family, which is probably something my mother would have wholeheartedly supported.  But still, it's not a good feeling to miss out on something like that.  Warning flag.

Early this morning, I saw a setup that ended up working but couldn't take it since it was the time to get the kids ready.  Of course, it worked.  And after I returned from working out and was getting my charts setup, I saw another setup or two that worked.  It was a good to know I was seeing setups that worked and was feeling confident for a solid day, although there was a slight sense of missing out.  Warning flag.

But then it appeared that a trend day up was starting as potential signals came up to short the market.  I kept saying this looks bullish, but kept shorting.  I couldn't pass them up, because they were valid signals, as well as my fear of missing out.  Internal conflicts.  Warning flag.

Before you know it, I had 2 full stop losses and I said I should quit here after being down about -4.50 ES points.  They were based on valid signals per my plan, but I wasn't pleased.  Warning flag.

I entered another trade and yes, it was a short against the trend, and I started to say shortly thereafter how it looked bullish.  Around this time, my sister called distraught about my mother's burial service -- the funeral home gave us the wrong urn -- it wasn't the ashes of my mom.  Ooops!  Warning flag.

Fast forward to about 3:10 PM, when I exited a 2 hour short trade with a small loss -- only 2 ticks below the high of the day.  Ugh.  Had I kept my original stop, I would have been fine.  Yet another warning flag.

OK...deep breath...no revenge trades, no rogue trades, no revenge trades, no rogue trades...


At 3:12 PM, I went long for the first time.  And I kept scaling in and getting stopped out.  At 3:30 PM, I got a sell signal, didn't want to believe it, and kept buying, even when the critical swing low got taken out. 

After missing the buy side all day, I must have been trying to make up for lost profits.  After I finally scaled out and went even, this one revenge trade campaign cost me -8.25 ES points, and my opportunity cost on this single trade was a whopping +10.00 ES points.  Crushing.  That might just be an all time record.

So, did the personal issues at hand help make this trading situation worse?  Perhaps.  Maybe I was taking out my frustrations at the market.  But had I done well, I could also have said that I was bolstered by the personal issues and how I rose to the occasion on yet another comeback.

But the bottom line is that this was a day where there were enough warning flags, one after another, to either not trade at all or to just stop early.  Instead, I didn't listen to my inner voice.  How many flags does it take to make me change my behavior?  I must to do a better job of self-managing myself, otherwise I will have a short trading career.

Rogue trading day hangover - monkey was in control

Total gross profits:  $-250.00  -5.00 ES points
Total trades:  17 [2 scratch]
  <- Scalp mode but 
      mostly overtrading
Accuracy:  47.7%
Execution score: 38.2%
  <- 5 trades were rogue :(
Opportunity cost: $-150.00  -3.00 ES points 
  <- But did better by 
       breaking rules

Earlier on Friday morning before the trading day began, I caught my self thinking, I'm really going to crush it today and make some serious P&L.  I've been reading the markets well the past couple days, but I just wasn't executing well based on what was possible, so things were gonna change. 

Then I caught myself -- I'm thinking only of P&L, tisk tisk.  The best mindset is to know that I have to patiently wait for the right setups according to my trading plan and simply execute it well.  Still, there was a certain sense of anxiousness I couldn't ignore, but I thought I could maintain my cool.

I was treading water during the morning, doing relatively well from the execution perspective, until I got a full stop out on a valid setup.  It should have been something that was just another trade, but I took it personally.  A full stop loss is usually a trigger for bad behavior, especially if it's the first trade of the day, or if I get two full stop losses in a row.

The stop loss was a direct hit against my mission (and ego) to maximize my P&L.  Ooops, I'm not supposed to be thinking like that.  That's when I knew the wheels started to wobble, especially when I started to double up or scale into some trades.

At around 10:50 AM, I wrote notes on the high likelihood of a V bottom day with new HOD as long as 1396.00 holds.  Not sure why, but it was one of those subconscious calls.  Another read that ended up being "right" in hindsight.  I was long from 1397.50 but I got stopped out by a tick with a trailing stop that was way too tight -- one of my weaknesses.

Within minutes, I started going short against my bigger picture scenario, again and again.  I was shorting against a move that I thought was going to new HOD's.  Conflict.

HUH?!?  Then why did I keep shorting against my bigger picture view?

I really don't know why, other than to get back at the market for stopping me out by a tick?  And before you know it, I was down about -10 ES points.

It was comeback time. 

I made some progress, recovered about 8 points, so with 10 minutes left in the cash trading day, I was down only about -2 points at one point. 

Do I stop now, or see what I'm made of? 

Then I thought, it's a quarter end Friday, so we should see some fireworks at the close.  Gambler Grove was was clearly heard from way up in the peanut gallery.  And he had a few monkeys sitting next to him.

OK, bring it on.

On the very next trade, I double clicked the DOM by accident.  Dohhh!  I didn't have confirmation turned on and since I was entering a 2 contract order, I was suddenly in a 4 contract trade -- way over my risk plan. 

After seeing what price action was doing, it wasn't moving in my favor so I panicked, ejected.  Lost 2 ticks (for a total of -2.00 points) within seconds.  Thud!  Bad start to the comeback.  Ouch.

After a few more trades, I ended the day with a loss of -5.00 ES points.  Better than the -10 I was down earlier.  Worse than the -2 I had just a short time ago.  It just wasn't meant to be a glorious comeback day where I ended the day solidly green.

Now as I reflect with a "rouge trading day hangover", it's back to trying to figure out, why? And what's with all these banana peels around here?

Trading is conceptually very simple -- just wait for those setups that have a good edge and execute the trade according to plan, period.  I've done my homework to know there are certain setups that have an edge over time, so combine that with good money and risk management.  I've proven that my method works over stretches of 1 to 2 weeks, assuming I execute properly.

But what is it that keeps me from doing the right thing, consistently, all the time?  Are my expectation too high?  Is my trading plan for ES not suited to my personality?  Why is it that my "comeback mode" turns me into a different type of trader?  Or are my comeback days just an illusion?  Why do revenge trades keep coming back after I was sure I had them under control?  How come it feels like I continue to run into the same brick wall over and over and over again? 

What can I do to improve?

The mental aspect trading is one of the biggest challenges I have faced in of my life.  And that's what keeps me so motivated -- the tougher the challenge, the more I rise to the occasion.  Another weekend to reflect and figure out the plan for next week.

* * * * *
Addendum: Since writing the majority of this post on Friday night and Saturday morning, I've since discovered a big gap in my overall process.  This may also help to explain the recent shifts in execution scores and opportunity costs.  Still working on it.

Another comeback day

Total gross profits:  $37.50  +0.75 ES points
Total trades:  7 [1 scratch]
Accuracy:  50.0%
Execution score: tbd %
Opportunity cost: $ tbd

Another day where it started with a losing trade, and I said to myself that I won't make the same mistake again as yesterday.

2nd trade - almost stopped out, but I got out at b/e. 

3rd trade - I scratched.  Maybe it's getting better.

4th and 5th trades - full stops.  Uh oh...

I was down about -8.00 ES points.  Ouch!  Oh no, not again.

Comeback time.

Deep breath.  Here we go again. Let's do it.

An ascending triangle was forming, and the infamous (at least to me) 1391.00 came up as a buying opportunity, again.  I have mis-traded this 1391.00 level for the past couple days with quite the negative outcome.

7th trade - So I tried it again, went long at 1391.00, and went back to my phone conversation.  I eventually exited at 1396.75, one tick below the first 1397.00 high of the day. 

Final tally?  
I'm up a few ticks gross -- net breakeven.

Time for a late lunch.  I'm done.  Game over.  My mind is not in sync, it's time to walk away.  Not going to let Gambler Grove come in this time to go for the big kill, or get killed.

My read on the market was better today than yesterday, but my execution and patience was not.  I was on a phone call for most of the morning dealing with some family matters, and took many of these trades while multi-tasking.

Probably very ill advised to do this, but then again, maybe it gave my subconscious time to quickly analyze the charts without the monkey getting in the way.

Back to SIM?
I'm starting to think of going back to SIM trading for a while.  The fact that I even thought of that, should be taken as a warning sign.  And the inability to calculate my execution score and opportunity costs, my most important metrics, is an even bigger concern.

I need to remember Rule #1, protect your capital.  I'll be back with a much better focus tomorrow!

2 day loss = 2 week gain

Total gross profits:  $-325.00  -6.50 ES points
Total trades:  11 [1 scratch]
Accuracy:  20.0%
Execution score: tbd %
Opportunity cost: $ tbd

Even with 1 hour less sleep than usual, extra family duty this morning, I was still feeling confident, even with the yesterday's performance hanging over me.  I was ready.

The first trade looked like a decent setup, and something I would take again and again.  But it went +1.25, just one tick shy of being able to bring my stop up to breakeven, and got a full stop out.

The yellow flag comes out
Uh oh, first trade that's a full loss -- that's when I should pull out a yellow flag and put it on my monitor.

Then the dreaded double clicking of the DOM took place, which entered me into a extra position.  At least this time, I was able to gracefully exit.  But still, another stop loss. 

This was followed by more sloppy and rogue trading, more losses.  Downward spiral.  Discipline was thrown out of the window, I was totally out of sync.  I was in a different world, in a not so good way.

This chart, from VanKar's Trade Analyzer, also shows that my entries were terrible, and rarely went much in the money before getting stopped out.  And you can see how I even let trade #5 get to +2.00 profitable, and yet I still booked a loss.  Shame.

Rogue Grove comes off the bench after lunch
During lunch, I tried to take a nap, but as exhausted as I was, I couldn't sleep.  So I made a decision to let Rogue Grove out to play.  The day was shot, the execution score was not even worth it tracking. 

I fully realized, this decision was dangerous.  Whether it was my fatigue that allowed it, or some part of my subconscious, I don't know.  It's almost a lose/lose situation -- if I made a good P&L comeback, then it reinforced potentially bad behavior.  If I really let things go, then the protection of my capital, my priority #1, was unnecessarily risk. 

"That Voice"
But on the flip side, there's a certain point where you need to start listening that "that voice" in your head, you know, the solid and reliable one that starts whispering to you what's about to happen, and is usually right.  Probably based on the culmination of hours/years of screen time experience, it's a voice easily confused with "Gambler Grove's" voice.  But I really believe that over time, it's becoming a little easier to tell them apart.

So I wanted to test it out.  To see if I'm getting to the point where I'm able to start operating at the level of an "unconscious trader."  You can absolutely argue the point that I wasn't of sound mind to make that decision at that moment in time, but it you know what, it still seems justified after the dust settled.  Chalk it up to a self discovery experiment.

The "almost" comeback
I was down about -10.00 ES points and got the P&L back to less than -1.00.  Not bad, a "typical" 9 point comeback.

But overconfidence took over, and I didn't want another one of those "almost got back to breakeven" days.  I wanted to close solidly green.  So "Gambler Grove" took the wheel from "Rogue Grove", and went for the gusto to CRUSH IT -- anticipating a big selloff into the close. 

Didn't happen.  Strike out.
Ended up going from -1.00, to -6.50 points, working 2 contracts around a short position.  But at least I didn't end up trading like I traded $TNA on this day. 

Back to where I started
The losses from the past 2 days have just about offset the gains from the past 2 weeks.  So essentially, I'm back where I started on March 1st. 

Gluttony took over today, and now I feel the effects.  Luckily, the damage was minimal.  Now it's time to regroup, refocus on the fundamentals, and get back on track. 

But first, I need a really good nights sleep.

Gotta earn the privilege to trade bigger

Friday, January 6

Total gross profits:  ($75.00)  -1.50 ES points
Total trades:  7  [2 scratch]
Accuracy:  40.0%  [excluding scratches]
Execution score: 35.7%  [yuck]
Opportunity cost: $275  +5.50 ES points

Here we go again, another day where at one point, I was over -6 ES points in the hole.  And once again, it was a battle for the rest of the day to get back to break even.

Although I only had 7 trades today (at least I didn't overtrade), the execution score of 35.7% indicates that I wasn't trading according to the plan.  So in hindsight, I'm very fortunate that this didn't turn out to be an exceptionally ugly day.  Had I followed my plan to the T, I would have ended the day with a +$200 or +4.00 point day, according to my opportunity cost calculation.

What caused this lapse of discipline?
I had made a decision a few days earlier to begin trading 2 contracts starting next week, since one of my issues has been whether to exit my single contract at +2, or to let it ride for a bigger gain.  Trading 2 contracts would make it much easier to scale out of 1, reduce your risk, and let the 2nd one ride.

So Friday seemed like a "last hurrah" type of day for my single contract days.  And once I was negative from the very first trade, I threw the discipline book partially out the window and started to throw Hail Mary touchdown passes instead by trying to let profits run beyond my usual +2 point profit target.

Whoa, Nellie!  Scratch the plans to move up to 2 contracts!
One of the points Renato has made many times is that he earned the privilege to trade bigger as he reached his goals.  I have made it a goal that I have an execution score of at least 80% or higher, which would then indicate that I am doing pretty well executing according to my trading plan.  After stepping back and realizing that 67% was my best execution score I had on a short week, I've made a decision to cancel the decision to trade bigger, and continue trading with 1 contract.

The new plan
I'll need to prove to myself that I have the discipline to trade with 1 contract consistently before moving up to 2.  Managing the risk of my portfolio should be priority #1, so there's no reason to rush into trading bigger.  Therefore, starting next week, I will exit my positions with a profit target of +2 points on a single contract, and imagine (i.e. track and manage) that I have a 2nd contract runner. 

This week, it's not about my P&L. It's all about my ability to follow the plan - how well can I focus on the process?  The execution score will be THE metric to track my success...just the way it should always be.

2.75 points of slippage in ES?!?

Highlight of the day?  My first trade experienced a 2.75 slippage, but luckily only on 1 contract.  I'm sure there are much worse examples of slippage on fills from the flash crash or other big news events.  I had a stop loss order at 1266.25 on a short position before the ADP employment report this morning at 8:15 AM, which triggered with a fill at 1269.00. 

I called TradeStation, and they pretty much said what I had expected and what I saw on the tick charts -- it's still holiday volume, so the thin volume combined with the bigger than expected number created a volatile move.  The usual canned response, but they do have a point.

But still, I would have accepted 4 ticks, but nearly 3.00 full points (11 ticks) of slippage on what's considered a highly liquid security does seem out of the ordinary.  I consider it a lesson learned with regards to putting your stops in obvious places, as well as having a position before a high impact news release.

Thursday, January 5

Total gross profits:  ($25.00)  -0.50 ES points
Total trades:  9  [1 scratch]
Accuracy:  33.3%
Execution score: 66.7%
Opportunity cost: ($125.00)
   [Positive impact due to a single large rogue trade]

Notes:
Due to the large slippage of the first trade, in addition to the 2nd trade of the day being a error (entered wrong price) that lost, as well as a full loss for my 3rd trade, I was down about -7.50 in relatively short time. 

I started to chip back, and there were some additional trades that went about +1.50 to +1.75 in the money, but they ended up with a small loss.  I hope to better capture some profits in those types of trades once I'm trading 2 contracts starting next week.

How I identify potential reversal days
By around lunchtime, it was clear to me that we had a potential reversal day ahead of us.  I've seen many of these chart patterns, so they seem pretty clear to me, and they seem to work more often than not.  Here are a few key "tells" of a possible reversal day:


A) The swing high that preceded the low of the day was broken. 
B) The swing down to retest the lows retraced about 61.8%, and never broke the upward sloping trendline
C) A tight consolidation formed, and broke out of the range.  After the high of day was broken, the reversal was well confirmed.  You can also see a 1-2-3 bottom formation

So once the trend appeared to be up and we were headed for a gap fill, I looked for opportunities (including those not specifically stated in my trading plan) to go long.  I found a decent setup that wasn't totally to plan (i.e. therefore I consider it rogue), and ended up with a trade that booked +6.00 (went as high as +8.75).  This enabled me to nearly breakeven for the day.

Today was yet another example where I was able to scramble and climb back up out of a deep hole.  Something in my mind changes and makes me a better trader when I need to scramble.  The real trick is to find a way to turn on that switch when I start the day flat!

Modifications to the trading plan
Since it appears that my trading plan is possibly too rigid with regards to entry setups, I'm in the process of modifying it to be a bit more flexible.  The only potential concern is whether the modification will become too flexible and enable me to consider any random and rogue setup to be part of the trading plan.

However, one area I will not modify is the trade and account risk management sections.  Those are areas that need to be kept on a tight leash.  This is what will keep me in the game for the long term when I hit my next rough patch on the road.

Pushing forward
I'm still experiencing the mental challenges of sticking to the plan, but it's also a time of transition, since my plan is current in flux for the move to 2 contracts as well as the modifications described above.  This is a time I'll need to be extra careful in order to ensure that the move to 2 contracts will not result in the painful outcome from back in November.

But to look at it from a more positive perspective, it's also a time to push forward with even greater focus and determination to trade according to the plan.  I will minimize entering based on rogue and sub-par setups, which will help me significantly to achieve my goal of becoming a consistently profitable trader.

Deja vu?

Monday, December 19

Total gross profits:  -($175.00)  -3.50 ES points
Total trades:  10  [0 scratch]
Accuracy:  40.0%
Execution score:  65.5%
Opportunity cost: $ -5.75
(yes, my rogue trades actually benefited me)

Today felt like Friday, right when the markets started to tank in the late morning before the lunch hour.  And once again, I started to buy at various levels on the way down.  But this time, I was better prepared.  I kept telling myself how this feels just like Friday's action, and used a little more caution.

But in the end, I still ended up having 5 full stop losses out of 10 total trades (1 of them was a rogue setup).  The markets the past few days seem to have been very tricky, and so this must be the whole "thin volume holiday trading" condition everyone talks about.

Bad execution score / favorable opportunity cost?
My execution score was 65.5% (3.5 non-compliant trades out of 10), so I didn't do very well from that perspective.  But what's more surprising is that the related opportunity cost was a favorable -287.50 or -5.75 points.  This means that had I not taken the rogue trades, I would have had a bigger loss today.

But to be more clear, it was a single rogue trade I took at the end of the day that ended up making +5.75.  If you were to add up the opportunity costs from the other 2.5 trades, they washed out.  So I'm not sure how to take this.  On the one hand, I had a smaller loss than I should have.  But on the other, isn't this one step closer towards consistently undisciplined behavior?

And what if?
And this brings up an interesting question.  What if my opportunity costs start to become consistently negative?  Essentially, this means that my rogue trades or "mistakes" are actually net positive for the bottom line.

More tracking to do
I've struggled with avoiding trades that I know have a decent chance of working, since it's not part of my trading plan.  But this "opportunity cost" metric might be another way of tracking to see if there are certain setups that I "mistakenly" take, but have a good probability of working well over time.

Why fight it?
Because if the setups that I struggle with avoiding are truly valid, why fight something that screams at you from within your soul and works in the long run?  If that's the case, then I'll modify my trading plan so that I can take the trades and be at peace with myself.

The jack broke while changing the tire, but I ended up OK

Friday, December 16

Total gross profits:  -($37.50)  -0.75 ES points
Total trades:  22  [2 scratch]
Accuracy:  50.0%
Execution score:  TBD
Opportunity cost: $ TBD

As I was putting the "tire" back on the car today from my ugly day yesterday (Thursday, 12/15), I thought I was making good progress. But then, the "jack" broke and the car came crashing down with a thud. Luckily, I didn't get hurt, regrouped, and ended the day about the same place as I started (excluding commissions).

SIMPLIFIED SUMMARY:
I was up +4 (I'm back!), then torn up by a nearly -12 run (I'm not!), scrambled to gain nearly +8 points in less than 2 hours, and ended the day just about breakeven (phew!). A little roller coaster ride.

All the while, Renato made a call to short the high of the day (yes, once again) in the morning, and if you scaled out and held a runner until the close, you got at least +13 or more on the final contract. He had a nice, relaxing day before the weekend. Yet another impressive winning week for him.

DIGGING MYSELF OUT OF A HOLE - REVISITED - AGAIN
This "digging out of the hole" trading reminded me of days when I was trading stocks several months ago. More often than not, I would start the day on a bad note and scramble my way back to breakeven. As noted in the prior post from a few months ago, I have a different mindset when trading from a position of having profits vs. being deep in the red with back against the wall. This is something I will continue to address, since there's something going on there.

RANDOM THOUGHTS

• Opex in December, low volume choppy semi-holiday feeling day. Does it really matter one way or another? Just trade what you see, right?
• I have a tendency to get tired and sloppy starting around lunchtime. This causes stupid mistakes.
• When the ES started to tank during lunchtime and it felt somewhat fake and lame news driven, my mindset became "get in on the action and fade the move!"
• Did I mention how I tend to make stupid mistakes around lunch?
• Am I done with my Christmas shopping yet?
• I'm trying to learn to fish in a way that fits my style, that's why it's hard for me to blindly follow Renato's (very successful) Diamond Setups alerts.
• When I follow my trading plan, everything feels simple and straightforward. It's almost mindless and businesslike to follow the process. And isn't this interesting, although it seems like I miss out on a lot -- results are generally good and stable.
• When trading rogue based on instincts, it demands much more mental focus and energy beyond just execution. Results can be much more volatile (usually to the negative side).
• When push comes to shove and I'm up against the wall, I don't get scared, and I don't give up. Historically, my scrambling has worked much more often than not.  
• But what if it doesn't work?  Will I stop trying, when my account is at ZERO?
• What am I scared of? We'll be having 5 people (including in-laws) staying with us for a week over the holidays. Probably will NOT be trading during that time.
• Screen time and intensive trade reviews -- no other substitute for learning how to trade. My directions to trade have finally become IKEA like.
• Supreme control over my mental chatter (i.e. "Gambler Grove") and only doing what's right -- this will be my holy grail. Biggest challenge now (and likely forever).
• Interesting thought - without a good breakfast and lunch, I lose energy and don't trade well. Need to track, but I think there's something there.
• Another interesting thought - when I exercise during the morning, I do better. Also need to track.
• I can feel it -- 2012 will be a great year.

To scale, or not to scale out?

After trade reviews of the challenging narrow range day in ES on Friday posted here, I did a "what-if" type analysis on my trades with regards to scaling out.  Renato mentions in his blog post here the advantages of scaling out and an example how.  I also believe this is a great way to potentially reduce risk and increase profits, *IF* you're starting with the adequate number of contracts and scaling out properly. 

My current scaling out strategy
Instead of using units of 4 contracts as Renato recommends, my current trade management of scaling out usually involves starting with 2 contracts, exiting 1 car at +1.50, and letting the other run after bringing up the stop loss to +.25.

As you could imagine, nearly most of the time the 2nd car is stopped out at breakeven.  So from the pure mathematical perspective, unless you occasionally have a monster runner, the #'s just don't seem to add up for the scaling out method I use. 

The reason to dig deeper?  Because I had to climb so far
My gross profit on Friday was $50, and that's after going into aggressive scalp mode about 1.5 hours before the close and climbing myself out of a $600 loss on 12 trades.  That type of P&L curve doesn't sit well with me so it was time to do some further analysis. 

One point was clear, I was not patient enough and entered some non-strategy (i.e. rogue) trades that contributed to the drawdown.  That was was got me into trouble for most of the day.  But there was also something about my scaling out strategy that I wanted to explore.

The what-if scenario I modeled
"What if I did NOT scale out and instead, simply exited my entire position at +1.50 when the 1st target was hit?"

Here are the results
Instead of ending Friday with +1.00 gross, I would have had an incremental:

• +13.75 if I used this method the entire day
• +9.25 if I used this method only during the final 1.5 hours of aggressive scalping

Crazy.  The few bad non-strategy/rogue trades I took earlier in the day were NOT filtered out of my analysis, so the results could have been even better. 

During the final 1.5 hours, the range of the ES was about  6.50 points, so these results are difficult for me to believe (but remember, they're simply based on the actual executions I took from scaling out of the 1st contract). 

What's also interesting is that when the trades were profitable, nearly all took only 1-3 ticks of heat.  So there's a possibility that the stop loss could be tightened up -- however, this requires further research and a much bigger sample size.

But can it be replicated?
A part of me wonders whether the aggressive scalping performance was due to luck and therefore, can not be consistently replicated in the future.  On the other hand, I have enough evidence over the past 3 weeks to believe that this type of performance can be more than possible. 

The real challenge is whether I or anyone can have the mental stamina to maintain this rapid-fire method of trading both intraday, as well as over days/weeks/months/quarters/years.  It's difficult being a human trying to keep up with the HFT algo-bots!

The bottom line
Renato mentioned this in his chatroom last week, and the bottom line is that you really need to be able to enter a trade with the appropriate number of contracts to effectively scale out.  So if you can't enter with at least 4 contracts, then you need to chip away and build up your account so that you can.  And only then can you take advantage of the powerful benefits that scaling out can offer.

Therefore, my new strategy starting this week will be to exit out of my entire position at +1.50 or +2.00, based on market conditions.  No more scaling out, since I will not likely be using that method when I start trading live.

My recent performance

Yesterday, I had limited number of trades and ended the day with a small profit.  The typical pattern took place:

• Started the day with a few small profitable trades
• Became more conservative and backed off for the rest of the day
• Ended the day with a small profit of about 1%
  

Today, the market was mostly choppy this morning, and even as I told myself not to get involved in the chopfest, I patiently waited and took what I thought was a decent trade, which then opened the floodgate into many many more small choppy losses in a row.  Discipline failed.

So once again, the typical "dig myself out of a hole" pattern took place:

• Started the day with a loss, which then accelerated into many small losses.  It was a chopfest in the morning
  
• My usual setups weren't developing
  
• My portfolio was down as much as -5.5% for the day.  Started to approach my "blow-up my account" levels
  
• Market started to pick up a bit in the afternoon, and I needed a comeback, so I decided to scalp TZA
• Scrambled my way back to a -2.5% loss for the day
  
• Didn't get to the usual breakeven this time, but I wasn't as in tune with the market today
  

Attitude Trader left a great comment under the prior post with a link to something Don Miller wrote regarding putting himself into the "comeback mode."  Don said he visualizes the following chart so that he always feel as though he just suffered a "devastating loss" and needs to refocus for a big comeback:

http://donmillerjournal.blogspot.com

Once again, this brings up a question I have to seriously consider -- more often than not, I seem to be able to consistently scramble my way out of relatively considerable losses, so why don't I just trade this way all the time?  Am I fooling myself trying to follow a certain trading methodology that I may not be "wired" to follow?

My trading week will be winding down starting tomorrow due to family visiting, so these topics will be food for thought for my mind to digest as I spend some time away from the markets.